Q: I have multiple payday loans and student loans. Can credit counseling help me with this, because I’m very far behind on all my bills?
League City, TX
A: For those who may not know, a payday loan is one of the worst ways to borrow money.
Payday loans are small loans that a borrower promises to repay out of his/her next paycheck, typically in two weeks. The fees can seem reasonable. For example, to borrow $100 you might pay $15. But when the fees are annualized, they often amount to triple-digit interest rates or more. I’ve seen loan contracts for interest rates of more than 1,000%. Additionally, when people find they can’t pay the first loan, they roll it into another payday loan, amassing even more fees.
This is a debt cycle you don’t want to get started.
At any rate, it’s good you are trying to address this situation before you start to get notices of any lawsuits. So yes, I would recommend seeking help through a nonprofit credit counseling service. You can go to the National Foundation for Credit Counseling’s Web site to look for an agency in your local area.